Q1. Consider a firm using a single variable input, labor and a single fixed input, capital. Please explain what will happen to total product, average product and marginal product curves when
a) Capital is increased, and then b) labor is increased. Assume a) and b) occur independently.
Q2. Suppose the price of gasoline at the pump is $1 per gallon and that 1 million gallons are sold per month. A politician proposes to add a 10-cent tax to the price of gallon of gasoline. She says the tax will generate $100,000 tax revenues per month. What assumption is she making? Explain?